Quality-Adjusted House Price Indexes

Adam D. Nowak and Patrick S. Smith

American Economic Review: Insights, 2020, vol. 2, issue 3, 339-56

Abstract: The constant-quality assumption in repeat-sales house price indexes (HPIs) introduces a significant time-varying attribute bias. The direction, magnitude, and source of the bias varies throughout the market cycle and across metropolitan statistical areas (MSAs). We mitigate the bias using a data-driven textual analysis approach that identifies and includes salient text from real estate agent remarks in the repeat-sales estimation. Absent the text, MSA-level HPIs are biased downward by as much as 7 percent during the financial crisis and upward by as much as 20 percent after the crisis. The geographic concentration of the bias magnifies its effect on local HPIs.

JEL-codes: C43 E31 R11 R31 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (13)

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DOI: 10.1257/aeri.20190337

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